Auto sector slowdown: Too many cars; too few buyers

Honda Cars India domestic sales fell 51.3% in August 2019, following consistent decline (41.40% in June and 48.67% in July). Will the Japanese Automaker survive the slowdown in India?

Video Credits: CNBC TV18

Honda Cars India has reported a 51.3 per cent decline in monthly domestic sales to 8,291 units in August 2019, the company had sold 17,020 units in same month last year. The company is hit by the recent ‘auto sector slowdown’ the most.

Honda Cars India sold 8,291 units in the domestic market in August 2019. The carmaker exported 227 units in August 2019. The domestic sales of Honda Cars India stood at 10,250 units in July 2019.

The carmaker also exported 227 units in August 2019. The figure is 62.2 per cent lower than 601 units exported by Honda Cars India in August 2018.

“The auto sector continues to witness high de-growth due to poor consumer sentiment. This is despite the high discounts prevailing in the market which makes it the best time to buy cars,” Honda Cars India Senior VP and Sales and Marketing Director Rajesh Goel said.

“We hope the recent measures taken by the government will help in improving consumer sentiment and demand creation as we move forward. With the impending festive season, the sales are likely to pick-up in coming months,” he added.

The domestic sales of Honda Cars India had declined 41.40% to 10,314 units in June 2019, while the numbers had dropped 48.67% to 10,250 units in July 2019.

August automobile sales: All major manufacturers report decline

Auto sales of all major players in the sector continued to witness a slump due to the ongoing economic slowdown.

In August, the total sales of Maruti Suzuki India have fallen 32.7% to 1,06,413 units, while that of Hyundai Motor India have declined 9.54% to 56,005 units.

Commenting on the sales performance, Tata Motors President Passenger Vehicles Business Unit Mayank Pareeksaid the market continued to be challenging, but the company has focused on improving its retail sales, which saw an uptick of 42%.

The country’s largest carmaker Maruti Suzuki Indiareported a 32.7% decline in sales at 1,06,413 units in August.

Auto sector slowdown: All eyes on Sep 20 GST meet

Finance Minister Nirmala Sitharaman had on August 23 announced a few measures including 30% depreciation for new vehicles.

Sitharaman had also announced to revoke the ban on purchasing vehicles for the government, to spur a turnaround but many in the industry felt the measures were too little too late.

Still, people are not going to buy a new car, it seems like, banks are not willing to give auto loans so easily due to the current economic slowdown.

The domestic industry is in the midst of its worst slowdown ever as on a year-on-year basis, sales have declined in 13 of the last 14 months. The last time sales had grown was in October 2018.

What is worse, the quantum of decline has only increased in the last few months indicating that the worst may still not be over yet.

“Consumer sentiment continues to be muted in August, with customers deferring the purchase of vehicles. Severe floods have also hurt the demand in the industry. Unfavorable exchange rate is not helping our cost,” said N. Raja, Deputy Managing Director, Toyota Kirloskar Motor.

The industry has been seeking a reduction in GST rate on cars from 28% to 18% and with sales continuing to fall at an alarming rate, all eyes would be on whether any reduction would be forthcoming at the next GST Council meeting on September 20 in Goa.

Tata Motors & Ashok Leyland’s factory shutdown

As the auto sector slowdown intensified, automakers announced shutdowns of their factories to adjust inventory.

Tata Motors Ltd, India’s largest commercial vehicle maker, closed its Jamshedpur and Pune plants for up to 12 days.

Moreover, Ashok Leyland Ltd, the third-largest commercial vehicle maker by volume, closed its Pantnagar facility for nine days last month due to weak demand.

Slowdown even in festive season

Car and 2-wheeler manufacturers tend to start adding to dealer inventory from August in anticipation of higher sales during the festival season, which starts with Onam in August and ends with Diwali in November.

The auto sales fell down instead of increasing in the month of August, which was against the market’s anticipation.

On the other hand, the demand for Seltos and Hector is indicative of the evolution in the behaviour of Indian customers below 35 years.